Sell underperforming 1 bed IP & Opportunity cost ?

[Alex P Keaton]

Good advice thanks.*

I'd be happy to walk away with minimum $35,000 profit after all the costs & that should be achievable. I should make a clear $35-50 k profit.

Yeah for sure! *I'd weigh up everything including CG prospects of the new ip I reinvest in as well as cash-flow of the new ip to hold.*

This small ip as it gets older & older will continue to be a drain on my cash-flow *& will prevent me from moving ahead because of the amount it's still NG. My strategy & I have decided on one now is to buy a newer property 1-3 year old for depreciation, less repairs.

In answer to the other questions yep it was cross colled with my ppor & in a unit complex of just under 20.*

My accountant did sums on a loan (including property cost, stamps, other costs etc) of $350,000 for a year 2012 villa. *It would be NG by $22 per week after tax Ian. This was for a $330,000 property renting for $330 per week.*Somewhere like Armadale would achieve this. I'd like to try to get a bit closer to cbd though if I can.

If I bought a near new villa in cannington it would cost around
$45 per week after tax to hold. Near new villas in Cannington are around the $400 k mark


What do people think of buying a villa in Armadale. Too far away?? It certainly would be affordable. It's a major hub & I hear money is being pumped into the area so there could be some good *CG in the future? *What do you think?*

 

[Tonibell]

My strategy & I have decided on one now is to buy a newer property 1-3 year old for depreciation, less repairs.

Don't know anything about the areas you are looking at - but would like to comment on the strategy.

From previous posts it seems that both capital and cash flow - outside of property - are a challenge and that property is part of the long term solution for this.

Given this is paying the premium that goes with a newish property a good strategy ? These properties do depreciate and not just for tax deduction purposes.

A crappy rundown property where you can add some capital value with a reno and add some positive cash flow at the same time might be the way you have to go - because you might not have the time or the capital right now to just let the market carry you to your goals.

The disclaimer to all this is that we have only every purchased crappy, rundown places and looked at the newer ones with disdain (from an investment point of view) - so maybe the problem is with us.

 

[macca446]

Hi,
In reading your strategy it seems to me that you are still ok wanting to lose money at todays low interest rates,personally if you cannot purchase a property at least neutral so when rates go up and they will at some point this strategy of neg geared will cost you especially as you want to grow your portfolio and purchase more on your income it will become a issue for you,we cannot all assume CG will come on all purchases its about buying right or getting something you can add value to. This is only my opinion and I am no expert just what I read from your posts
Macca446

 

[impala67]

In addition to what's been said, now that you confirmed you are cross-collateralised, have you spoken to your lender about selling it to make sure there are no revalue debt surprises as they will have the funds at sale time?

What's your opinion on the last two posts. Do you think a newer NG'd (after tax) property with untested CG/CA prospects, based around tax benefits is the way to go for your next purchase? Will this improve your financial situation and allow you to keep buying IP's?

 

[Blair007]

Hi Alex, why don't you get involved with a group like Binvested.
Ive never dealt with them but from looking in i think they would be a good company to deal with.

The only reason i say deal with them is because you seem to be having a case of analysis paralysis which myself and I'm sure many others have been through.

at least with employing a BA they will not be clouded and make the right decisions for you.

Cashflow is a big part of there strategy aswell which i think would suit yours also.

cheers

 

[S.T]

Hi Alex, why don't you get involved with a group like Binvested.
Ive never dealt with them but from looking in i think they would be a good company to deal with.

Why would you refer someone to a company when you've had no dealings with them?

 

[Blair007]

Why would you refer someone to a company when you've had no dealings with them?

Well i know Nathan was a forum member on here. Ive seen some of the deals they have found for clients and it looks like they would suit alex's strategy. I didn't say b invested as such, just a company similar to them. Obviously your on Due diligence is required but thats a given.

I was a bit stuck trying to find a development site this year in perth. I ended up using a BA in melbourne to help me find a site over there. It was the best decision i made.

Its only a suggestion, but i know from personal experience that 'analysis paralysis' can hold you back from making investments, a BA is a good way to overcome this.

cheers

 

[thatbum]

Its only a suggestion, but i know from personal experience that 'analysis paralysis' can hold you back from making investments, a BA is a good way to overcome this.

cheers

I agree with Blair here. It does seem like Alex might be being held up on the property selection process, and if that's the case, then a BA is the person to help out.

We all have aspects of development/investing that we are strong or not so strong at, and there comes a point where it becomes worth it to hire a professional to help overcome the weakness.

 

[MTR]

Alex

This is the type of thing that I would be looking at in your scenario, property where you can add value, close to the city and will be rezoned in the very near future (am told 12 months away)?, not to mention a corner block. When zoning comes in build at rear, and you have growth and cash flow. With current interest rates so low its a no brainer, this should probably rent around $400 pw, though I think you may be fighting with the crowd for this one. Unfortunately these agents work hard for their sellers.

http://www.realestate.com.au/property-house-wa-beechboro-116548791

 

[INVSTOR]

Alex

This is the type of thing that I would be looking at in your scenario, property where you can add value, close to the city and will be rezoned in the very near future (am told 12 months away)?, not to mention a corner block. When zoning comes in build at rear, and you have growth and cash flow. With current interest rates so low its a no brainer, this should probably rent around $400 pw, though I think you may be fighting with the crowd for this one. Unfortunately these agents work hard for their sellers.

http://www.realestate.com.au/property-house-wa-beechboro-116548791

That is a great location and reasonable price. My thoughts are that these agents mostly advertise at a reasonable price and sell quickly.

 

[INVSTOR]

If this has the required space to subdivide it may be worth considering. http://m.realestate.com.au/property-house-wa-morley-116475643

 

[Alex P Keaton]

Hi , i decided a couple of months ago to get a pro to help me. I agree in that I really have no idea what I'm doing. I'm meeting with a couple of BA's in my June holidays.

Also my loan will be approved in a couple of weeks. Both are uncrossed now.

 

[Alex P Keaton]

Budget is <$430 k

 

[sanj]

Don't you need to sell first? Selling a property Is a very easy and quick thing to do, there is no months of thinking and organising involved. Just make a decision and get on with it.

 

[MTR]

Hi Alex

If BA is going to get you motivated and you want someone to hold your hand then go for it, but seriously I would be doing it now as the market I mentioned is still rising due to demand.

In a hot market BA are competing with everyone else and believe it or not there will be many clients that want the same product as you... how's that going to work for you???

If you want to get the results you just have to get off your hands and do it yourself, agents will work with you if you know what you want, you are cashed up and you don't stuff people around, make a quick decision and make some money now. There are plenty of experienced investors on SS who can tell you what to buy and what not to buy.

Offload the cr$py property/ies that are bleeding you before the market changes and you are stuck with it/them for another 10 years, good way to keep losing money.

MTR

 

[S.T]

Well i know Nathan was a forum member on here. Ive seen some of the deals they have found for clients and it looks like they would suit alex's strategy. I didn't say b invested as such, just a company similar to them. Obviously your on Due diligence is required but thats a given.

I was a bit stuck trying to find a development site this year in perth. I ended up using a BA in melbourne to help me find a site over there. It was the best decision i made.

Its only a suggestion, but i know from personal experience that 'analysis paralysis' can hold you back from making investments, a BA is a good way to overcome this.

cheers

I understand what you're saying, just curious about why people plug companies they've had no dealings with on this forum.

In my opinion, as sanj posted, Alex needs to deal with selling this poor performing asset first and make that decision before moving on to the next purchase.

 

[Alex P Keaton]

Don't you need to sell first? Selling a property Is a very easy and quick thing to do, there is no months of thinking and organising involved. Just make a decision and get on with it.

Yep, I've thought long and hard about it for the past few months & realize this is what I need to do. So now I'm taking action! thanks for the encouragement and push

 

[impala67]

...So now I'm taking action!

Good to hear. Good luck too.

 

[Alex P Keaton]

Hi Alex

If BA is going to get you motivated and you want someone to hold your hand then go for it, but seriously I would be doing it now as the market I mentioned is still rising due to demand.

MTR

Well Its not the motivation factor. I feel I do need someone to hold my hand as you put it. I will let BA I want to be involved & learn. I just don't have the experience, skills, knowledge or confidence at this point to go it alone & I recognize that. I need to get help with a strategy, and I'm sure I will learn a lot in the process. For the $10 grand or so that I'll draw out of my loan to pay for BA will pay for itself in the short term & long term if hopefully BA and I buy an ip that will grow and yet not be to draining cash-flow wise.

Thanks everyone for the support, patience & encouragement. I'm also actively looking for another job too so it is a bit of a stressful time for me. I'll get on to some agents now. I'm on my lunch break so I will make a couple of calls.

 

[Alex P Keaton]

I rang 2 agents today. First one I was impressed with when she sold me my ppor so I thought I'd give her a call. She will be doing a valuation soon. Even though the lease expires in August she believes both fhb's and investors will be interested & if a fhb buys it they have got 12 months to move in to qualify for the government grant. She preferably would have liked the lease to be periodic but she says it shouldn't effect things. We can make it work.

The 2nd agent who originally sold me the ip recommends I wait until June to put it on the market as there will be a pool of more buyers. Lots of fhb buy these types of properties & they will be put off by having to wait until August to be able to move in.

Oh & also I found out the tenant was/has been reconsidering moving out. Maybe that is why she took so long to sign the lease.

I'm inclined to go with agent #1 and if it's a fhb that buys it maybe they won't mind waiting a couple of extra months to move in.

Which agent do you agree with? I think I'll give it a crack now & see if it sells